The California exodus

County CEOs are retiring at an alarming rate--what does it mean for us?

Running a county seems as though it would be one of the best jobs around. If you’re one of the lucky 58 Californians who have this job, you oversee a vast area, control millions of dollars, and administer a multitude of helpful government programs. You’re at the top of your profession and in charge of thousands of people. Your salary and benefits are great.

So if the job is so great, why are you leaving?

California’s counties are rapidly losing their executive administrators: five in 2007, six in 2008, 13 in 2009, and two already slotted to leave in 2010, according to the County Administrative Officers Association of California. More than 33 of the 58 county boss positions are currently vacant, run by temps, or held by rookies who have less than three years of experience in that job, according to the California State Association of Counties.

A storm of seemingly insurmountable problems is approaching, and many county officials are fleeing. Blame a faltering economy that drains tax revenues, rising pension costs, and stalled governance at the state capitol. Just like muscle cars designed for 25-cent-a-gallon gas are impractical in a $3.50-per-gallon era, counties tuned to run on revenues from the good times recently past are headed for brutal new economic realities.

“They [county administrators] have had a particularly bad period of time,” said John Sweeten, executive director of the County Administrative Officers Association of California and a former county administrator himself. “And it’s going to get a lot worse.”

Some of the recent rapid turnover is due to the usual gyrations of the job—change-ups when a board of supervisors sours on a county executive. There’s also a generational factor: Baby Boomers are beginning to retire in a great generational flood. Neither of those factors, though, account for the high turnover. And that worries Paul McIntosh, executive director of the California State Association of Counties, an organization that lobbies on behalf of counties.

“These are exceptionally challenging times [for county executives],” said McIntosh, a former county executive with 20 years’ experience. “[The executives] are always a lightning rod for controversy. They constantly have to take on the unions or the supervisors. It just wears on you.” But he said the combination of a faltering economy and state government teetering on the edge of bankruptcy has had an especially nasty effect on county governments.

California long signified abundance; it was a place of seemingly endless good fortune. In the 1950s and 1960s, immigrants from the East and Midwest flocked to California for sunshine, superb schools, and well-paying jobs. Some analysts attribute the Cold War as a driver for the boom, which fueled decades of military spending that poured jobs into the state, especially southern California. The economic expansion, whatever its causes, spurred a housing boom, and rising home values increased personal wealth. Thanks to the flourishing economy, tax revenue flowed into the state’s coffers. Some of that wealth the state spent to create one of the finest higher educational systems anywhere, ever; in fact, two. State universities cost almost nothing to attend—relatively small fees imposed by Gov. Ronald Reagan in the late 1960s sparked heated protests. State and county governments built many roads and schools and expanded concurrent with an influx to the state of well-educated middle-class workers.

The ’70s saw inflation and higher taxes. In response, voters approved a measure that struck terror in the hearts of California government administrators: Proposition 13. Though it passed more than 30 years ago, the shadow of Proposition 13 casts a long shadow on county executives. When they talk about the years before the legislation, it often sounds like they’re talking of Eden before the fall.

In their minds, Proposition 13 changed everything. Voters overwhelmingly passed the proposition on June 6, 1978, which placed a cap on property taxes and has reduced their rate of increase by 1 percent a year for most homeowners. It also stipulates the state legislature can raise taxes only by at least a two-thirds majority vote. Though many California officials predicted state government services would subsequently collapse, that didn’t happen. But the proposition did cut the existing tax base and made the counties dependent on the state government for revenue.

The state government can turn off the money spigot to counties in many ways. It can cut programs, withhold funds for programs that counties are required to pay for, and even “borrow” money from local governments. All of these factors can make running a county government hellish.

A study by the California State Association of Counties about how the state budget crisis is affecting county and city governments shows the effect of the economy and cuts at the state level on county budgets. The survey looked only at the 2008-2009 budgets (most of which ended last summer): a financial picture that didn’t reflect the full brunt of the economic downturn.

According to the survey, 75 percent of the counties that responded have used work furloughs and layoffs to cut budgets. Counties cut their planning and zoning budgets by 7 percent, with the next highest cuts in the categories of general expenditures and fire services. The authors of the survey said property taxes were beginning to decline, and they saw “little light at the end of the tunnel for local governments in the short term, since cutbacks in state services are likely to continue or get worse.”

Counties are particularly vulnerable to what happens in Sacramento: More than 54 percent of California counties’ income comes from the state government.

The survey shows how counties are the level of government most affected by the downturn: Sacramento can balance its budget by withholding money from counties, yet counties have to deal with increasing demand for social services. Counties run most of the state’s welfare programs.

The state government is quickly approaching its next crisis. The state budget is $21 billion in the red—even after drastic cuts made less than six months ago. With the two-thirds majority requirements in place to raise taxes, there’s little chance of increasing taxes to cut the deficit. Large cuts are likely the tool the legislature will use to whittle down the deficit, and counties are the ones who will probably endure the brunt of the cuts.

Along with the rest of the state’s counties, both San Luis Obispo County and Santa Barbara County are heading for rough times. San Luis Obispo County will face an estimated $24 million deficit for the 2010-2011 fiscal year that starts in the summer. Santa Barbara County is estimated to have a $17 million deficit for the 2010-2011 budget and to be in the hole by $45 million by the summer of July 2013. These are only preliminary estimates; the reality could be far worse.

Both San Luis Obispo and Santa Barbara counties will likely have to find new county executives in 2010. In May 2009, San Luis Obispo County supervisors fired their executive, David Edge. They didn’t give a reason at the time, but Edge later claimed the board no longer “valued his leadership”—though a sexual harassment lawsuit from his former deputy, Gail Wilcox, might have had something to do with it. Santa Barbara County Chief Executive Officer Mike F. Brown is scheduled to retire on Halloween after taking an early buyout.

“We are required to perform the same services for less and less money,” said Jim Grant, who’s acting as SLO County’s CEO until December. “We are basically a subsidiary of the state.”

Grant said the job has become far more difficult than in past years.

Counties have become very hard to run, he said, and the next budget will be very hard for him and the supervisors to balance.

Welfare programs for the poor are likely to be hit hard in the next budget fight in Sacramento, and counties—the arm of government that administers Medi-Cal and other social services—are sure to feel the effects. Even when counties’ monies aren’t cut by the state, legislatures use accounting gimmicks to delay or reroute funding for the programs, straining county coffers to the breaking point.

“The big problem is the structure of the county’s relationship with the state,” said Brown, Santa Barbara County’s executive officer. “Counties maintain the federal and state [societal] safety nets, and when the money is cut off, [counties] don’t really have the legal ability to raise their own revenue.”

The state has even borrowed from cities and counties—$4 billion in the two years prior to the 2009-2010 budget.

“For the last 10 years, the state government has been picking the pocket of counties,” said Peter Detwiler, staff director for the California State Senate’s Committee on Local Government. “For the near term, managing a local government will be harder than ever.”

Detwiler said cuts on the county level will probably fall on those who have the least voting power: health and social services for the aged and the poor.

Cities and counties are bracing for what budgetary horrors await them in 2010. Though rarely talked about in open meetings, county workers’ employee benefits and pensions traumatize officials worried about the future. Sometimes the issue breaches the surface: At an Oct. 11 San Luis Obispo County board of supervisors meeting, Supervisor Frank Mecham said of future pension costs, “If we don’t fix this now, we are going to suffer down the line.”

As the economy nosedives and stock markets plummet, pension funds lose value and county governments have to pour money into them to balance them, McIntosh said. The Santa Barbara County pension fund is $1 billion dollars underfunded, and there’s a $299 million underfunding for the San Luis Obispo County fund. (These are figures from the first half of 2009; the stock market has likely improved the pension funds standing considerably.) In December, San Luis Obispo County supervisors unilaterally raised their employees’ contribution rates by .92 percent and threw in $790,000 to try to help balance the fund.

Like water rising to the neck of a drowning man, pension obligations threaten to choke budgets, squeezing out programs that people like and rely on, said Marcia Fritz of the California Foundation for Fiscal Responsibility. Governments—whether on the state, county, or city level—are obligated by law to maintain funding and make sure the retired employees get their pension benefits. In other words, the public is on the hook.

As more state workers retire and the pension funds lack enough resources to pay, Fritz said, counties will have to kick in more money from their general funds.

Santa Barbara and San Luis Obispo counties are actually in better shape than most; their independent funds keep them free of CalPERS (California Public Employees’ Retirement System), the largest public pension fund in the United States with $202 billion (as of September) in assets. CalPERS invested heavily in the real estate market and lost more than $55 million in 2008-2009.

But if employee benefit costs continue to rise, county executives will have to manage budgets they have less and less control over.

“There is nothing much they can do” Fritz said of county executives’ ability to deal with rising costs. “Governments will be desperate for money as their labor costs squeeze the rest of their budget.”

Fritz pointed out that while county executives may complain about rising pension costs, generous benefits allow many of them to retire at a relatively young age. Many county executives can retire with generous benefits in their mid-50s.

Government workers at all levels are feeling the effects of related rising pension costs and a declining tax base.

The waves of rookies in major positions isn’t just a county phenomenon, McIntosh said. It’s also happening at the city and state level. He cited the new state finance director, Ana Matosantos, who is 34. Much of the senior staff of the legislature has recently retired, and most of the replacements have less than 10 years of experience, McIntosh said.

Though there isn’t anything wrong with the rookie administrators around the state, McIntosh said counties and other governments around the state are losing something important.

“We have lost a lot of things, a lot of wisdom,” McIntosh said. “There is a lot of institutional knowledge lost.”

Someone who’s taken that institutional knowledge and is leaving is Sweeten. He’s the retiring executive director of the County Administrative Officers Association of California and boasts more than 20 years experience in county government, including a stint as county executive of Sacramento County.

He said he’s noticed the big turnover rate and isn’t surprised; the job isn’t what it used to be. People want to run counties because they want to build things and impact the communities they live in.

“They find themselves having to cut public services, assistance of the poor,” Sweeten said. “They will be forced to cut the services that made them become what they are. The job becomes all about fighting cuts rather than providing services.